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Final Pitch Made for New Transmission Link Critical for Major Wind, Solar Projects

Transmission companies ElectraNet and Transgrid have made their final pitch to the regulator for the proposed new $2.4 billion link between South Australia and NSW, arguing it is essential for Australia’s clean energy transition and will unlock significantly bigger benefits than previously thought.

The new filings to the Australian Energy Regulator for the 900km, 800MW Project EnergyConnect (PEC) transmission link is the last major hurdle in what has been a typically drawn out regulatory process.

The AER has previously expressed concern about the amount of monetary benefits from the project, particularly after a blowout in construction costs, but its approach has also been criticised as too narrow and lacking the broader benefits of the clean energy transition, of which PEC is seen as a critical component.

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The Australian Energy Market Operator took the near unprecedented step earlier this year to urge the AER to support the project, arguing that it would deliver small but important net benefits under current market scenarios, but would deliver significantly wider benefits in the event of a rapid exit of coal from NSW.

The project has also received the backing of the two state governments, both moral and financial, with South Australia energy minister Dan van Holst Pellekaan supporting AEMO’s letter to the AER with the message: Get on with it”.

ElectraNet and Transgrid have also been battling the main market rule-maker, the Australian Energy Market Commission, in an attempt to fast forward some of the revenue from the project to help manage the significant debt that will be incurred. That was rejected but the network companies are ploughing on anyway.

They have also been battling incumbent coal generators who have sought other rule changes that would narrow the regulatory approval process even further.

“This is an important project for the national electricity grid and is a priority project for ElectraNet, the Australian Energy Market Operator (AEMO) and many other stakeholders,” ElectraNet CEO Steve Masters said in a statement.

“ElectraNet is mindful of the rapid pace of change across the NEM and the importance of the project delivering the expected benefits for customers,” Masters said.

Masters said benefits from recent policy and market developments – which were not included in AEMO’s 2020 Integrated System Plan – and have concluded that overall, the project benefits are likely to be between $190 million and $440 million higher than previously forecast.

ElectraNet says this will translate into a $100 a year reduction for South Australian electricity consumers, and $60 a year for NSW customers.

But the biggest benefit will come in the link’s ability to unlock vast amounts of new wind and solar projects, and help South Australia meet its net 100 per cent renewable energy targets, and NSW in its accelerated transition away from coal.

The AER says it will make a decision as soon as it can, and it has about 40 business days to do so. The two network companies will then take that ruling back to their boards for a final investment decision. If they go ahead, and the environmental impact statements are accepted, then construction will begin in November and could be complete by 2023.

That process is expected to trigger a wave of new project commitments in both states, but particularly in South Australia, where the new link will remove many of the grid constraints that currently limit the output of wind and solar in that state, even though it already sources an average 60 per cent of its demand needs from these two technologies.

“The SA-NSW Interconnector is a critical project to deliver the Marshall Government’s intention of net-100% renewables by 2030,” van Holst Pellekaan said in a statement on Tuesday.

“The Marshall Government has been underwriting work on the interconnector, with approximately $75 million for early works to get the route selected, development application lodged, towers designed and contractors secured.

“This means that with a final investment decision, construction will commence promptly to deliver the project as soon as possible to benefit consumers.

Source: ElectraNet
Date: May 4, 2021

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